Drayage Firms Bear Brunt of Supply Chain Cost Increases

Whether it’s the growing presence of mega-ships at U.S. ports, the proliferation of mandatory appointment systems at marine terminals or the transfer of carrier-owned chassis to equipment leasing firms, harbor trucking companies are paying a price for decisions made by other members of the transportation supply chain.

Port authorities on both coasts have formed supply chain optimization groups to mitigate the impact of these developments on drayage companies, but the ultimate solution remains elusive. “Collaboration will only take you so far,” Philip Davies, principal, Davies Transportation Consulting, told the JOC’s 16th TPM Conference last week here. “You still have unilateral decisions being made, and costs go to someone else,” he said.

Carriers in recent years have inundated ports in Asia, Europe and North America with vessels that have capacities ranging from 10,000 to more than 18,000 twenty-foot-equivalent units. The mega-ships are forcing other members of the supply chain to cope with the physical and operational stresses that result on an infrastructure that was designed to handle vessels half that size.

The impact of big ships operated by four major carrier alliances calling at fewer ports results in vessel bunching, complex container transfers among supply chain partners and a desire by terminal operators to manage the traffic flow through mandatory appointment systems. Trucker appointment systems are in effect or will be later this year in Vancouver, B.C., Los Angeles-Long Beach, New York-New Jersey and Norfolk.

Mandatory appointment systems in fact do help terminal operators manage traffic flow and plan their labor and equipment needs each day, and the result can be to expedite the movement of trucks into and out of the facilities. Davies noted that Port Metro Vancouver has had mandatory appointments for about 10 years, and after some “teething troubles,” Canada’s largest port was able to reduce average truck visit times from about one hour to 35 to 45 minutes.

In order to work effectively, though, Vancouver’s terminal operators added a second shift each day and spread the appointments out over 16 hours. The terminals pay a fine when a turn time exceeds 90 minutes, and initially the terminals paid millions of dollars in penalties. Terminals responded by rationing the number of appointments they will accept for each slot. Terminals now pay very little in fines, but truckers say they are inconvenienced because the slots available to them for appointments have been reduced, Davies said.

Five of the 13 container terminals in Los Angeles-Long Beach operate with mandatory appointment systems, and three to five more will require appointments this year. Weston LaBar, executive director of the Harbor Trucking Association of Southern California, said appointment systems sometimes reduce trucker visit times, but not always. The HTA each month reports turn times at the 13 terminals based on information supplied by trucks equipped with GPS. “It’s a mixed bag. Some of the better terminals have appointments and some of the worst have appointments,” he said.

Global Terminals in New York-New Jersey announced that this year it will introduce a mandatory appointment system only from from 8 a.m. to 10 a.m. to prevent truck bunching when the gates open, but even that modest step has created apprehension among truckers, said Gerald Coyle, vice president of environmental and sustainable operations at Evans Delivery Co.

Appointment systems he has seen usually have “too much stick and not enough carrot,” and information on container availability is not readily available. Furthermore, both the terminal operator and the motor carrier must have accountability to make the system work to everyone’s advantage, Coyle said. “Everyone must have skin in the game,” he said.

In addition to dealing with the normal vagaries of urban traffic in many port cities, the ability of truckers to control their arrival and departure times at marine terminals has been further compromised by the decision of ocean carriers to sell most, but not all of their chassis to chassis-leasing companies.

Los Angeles and Long Beach responded to this development in early 2015 by working with Trac Intermodal, Flexi-Van and Direct ChassisLink to form a “pool of pools” with interoperable chassis. The gray-chassis pool allows truckers to pick up and drop off chassis at any locations in the harbor area without regard to who owns the equipment. This system significantly reduced the number of “split moves” in which a trucker would have to drop the container off at one location and the chassis at another because the two pieces of equipment belonged to different parties.

A problem still exists, though, because ocean carriers still control about 10 percent of the chassis, which they use in cases where their service contracts with customers specify the use of a certain lessors’ chassis for so-called “store-door” moves in a bundled payment arrangement.

Those moves may require that the trucker go first to a location in which the chassis-leasing company stores the equipment, and then to the terminal, racking up extra time and fuel costs. Conversely, the trucker can use the chassis he has on hand, at his own cost. “They have to make the decision: Do I eat the cost of that chassis, or do I wait until there is a chassis available that I can use?” LaBar said.

Also, despite the overall success of the pool of pools in Southern California, some terminals on some occasions run out of chassis, and that also makes it difficult for truckers to keep to appointments. New York-New Jersey had intended to have its market-based chassis pool in operation last year. However, delays resulted, and truckers are waiting somewhat apprehensively for that to happen, for the same reasons experienced in Southern California, Coyle said. “The ocean carriers are out of the chassis business, but they’re still in it,” he said.

Given the complexities involved in new chassis arrangements, meeting the needs of truckers as well as marine terminals through mandatory appointment systems, and handling ever larger vessels, including 18,000-TEU ships that will be calling soon on the West Coast, it will be more important than ever that shipping lines, terminal operators, equipment providers and truckers share information in real time, said John Cushing, president of PierPass Inc., which represents terminal operators Los Angeles-Long Beach.

While all of the pieces in the puzzle are not yet in place, the ports provide a forum for all of the parties in the supply-chain optimization effort they formed last year, Cushing said. If the effort is successful, terminals will know how much labor and equipment they will need each day, chassis lessors will know how much equipment is needed by each of their customers and where the chassis will be needed and truckers will know when to dispatch their drivers based upon container and equipment availability. “Communication is the key,” Cushing said.